Bank of America Top MBS Underwriter in 2009. What is an MBS Underwriter?
Fannie Mae, Ginnie Mae, and Freddie Mac once again kept the mortgage-backed
securities (MBS) market going during 2009.
The three government-sponsored enterprises wrote 89 percent of all new
issues during the year, contributing to an increase of 51 percent in new MBS
compared to 2008.
Thomson Reuters reported on the eve of the holiday weekend that $291.5
billion in securities were issued during the year compared to $193.0 billion in
2008. That year was admittedly the
slowest year for new MBS this decade, but the 2009 activity was hailed by Thomson
Reuters as indication "that investors' appetite for risk improved amid
signs of stabilization in the housing market."
The shift to the agency MBS market is not new. It has held the lion's share
of the market since 2007 when originators began to shift loan securitization supply away from
non-agency sectors as concerns about mortgage foreclosures started to
surface.
Bank of America was the leading underwriter of U.S. mortgaged-backed securities,
underwriting 63 issues or 17.5 percent of the total market. Bank of America underwritten securities were
valued at $51 billion. Goldman Sachs & Co was the second major player with a 13.7 percent
market share from underwriting 32 issues totally 39.8 billion, putting them in
a near tie with Barclays Capital. The subsidiary
of UK lender Barclays underwrote 32 issues worth $39.6 billion, a 13.6 percent market
share. The 2009 activity was a major shift
for Goldman which underwrote only $6.7 billion in new issues the previous year
for a 9th place ranking.

Thomson Reuters also released data for securities issued during the fourth
quarter of 2009. Bank of America was also
the top underwriter during that period, managing 16 issues worth $10.3 billion,
a 15.8 percent market share. Goldman
Sachs held second place with 7 issues totaling $8.0 billion, a 12.2 percent share.
Credit Suisse was in third place during the quarter with an 11.5 percent share
from underwriting 11 issues worth $7.4 billion.
Credit Suisse was fourth for the year with 52 issues totaling $38.3
billion, a 10.5 percent share.
Thomson Reuters tracks mortgage bonds backed by whole commercial and
residential real estate loans as well as the mortgage-backed securities
initially packaged by Fannie Mae, Freddie Mac and Ginnie Mae. Interest-only and
principal-only strips of the so-called agencies are not tracked.
MND Managing Editor Adam Quinones provides some insight on applications of the term "underwriter" in the securities market.
Many readers have an understanding of the term underwriter based on
its function in the loan application process. In this context, an
underwriter is someone (or DU/LP) who reviews the credit and collateral
of a borrower before their mortgage application is approved. This
version of an "underwriter" looks to ensure the borrower is capable of
making timely mortgage payments based on their employment history,
savings and investments, and credit history. The underwriter also
reviews the collateral, which backs the loan in the event of default,
to confirm that the home is re-saleable based on an appraisers opinion.
A mortgage loan underwriter is not the same as an MBS underwriter.
In the context of a mortgage-backed security, the underwriting
investment firm (aggregator) essentially purchases unsecuritized loans
at a specific price (aggregate coupon yield) with the intention of
selling them to an issuer or guarantor (GSEs and Ginnie) for a higher
price to lock in yield spread.
An MBS underwriter like Bank of America or Wells Fargo can also be
the originator of the MBS issue, meaning they bought loans from smaller
loan aggregators (correspondents and brokers) and pooled them together
for securitzation by Fannie, Freddie, or Ginnie (label/guarantee) which
will then be resold in the secondary market or held in the GSE
portfolio.
Plain and Simple: MBS "underwriters" are at the top of the supply chain when it comes to aggregating unsecuritized mortgage loans.
(This varies from a CMO underwriter who aggregate already
securitized pools and looks to resell for higher price. Key difference:
loans are already securitized and trading in the secondary market.)